Nigeria Collects N2 Trillion in Taxes from Foreign Tech Giants Google, Facebook, and Others

The federal government of Nigeria has amassed a significant sum of N2 trillion ($2.5 billion) in taxes from foreign companies operating within the country, including tech giants like Google, Netflix, and Facebook. This tax collection spans a 15-month period and includes both Company Income Tax (CIT) and Value Added Tax (VAT).

According to the Federal Inland Revenue Service, the Company Income Tax (CIT) is set at a rate of 30%, applicable to the profits of companies, while Value Added Tax stands at 7.5% and is paid by end consumers when purchasing goods or utilizing services.

Reports from 2020 indicated that Nigeria’s government intended to levy taxes on foreign digital service providers, aiming to ensure their contribution to the country’s revenue given the revenue generated from Nigerian customers.

To address this, the former Minister of Finance, Zainab Ahmed, introduced the Companies Income Tax (Significant Economic Presence) Order in 2020, amending the Finance Act of 2019. This was designed to tax foreign entities involved in specific services or digital transactions based on their Significant Economic Presence in Nigeria.

This order includes provisions enabling the finance minister to define the criteria for determining a Significant Economic Presence (SEP) within Nigeria. Foreign entities engaging in activities like providing digital video and advertising services to the Nigerian population, as well as those like Alibaba and Amazon generating income through various activities, were affected.

Under the Companies Income Tax Order of 2020, companies with an annual income of N25 million or $31,250 and possessing a Nigerian domain name or web address are subject to the regulation. Foreign companies consistently interacting with Nigerian individuals, targeting Nigerian customers by displaying prices in the local currency, are required to pay taxes.

While the digital economy taxation aims to enhance compliance and modernize taxation, challenges of enforcing compliance without international consensus and jurisdictional reach remain.

Notably, between the first quarter of 2022 and Q1 2023, foreign companies contributed over N1.98 trillion ($2.475 billion) in taxes, with N1.32 trillion ($1.65 billion) from Company Income Tax and N661.93 billion ($827.41 million) from Value Added Tax. This signifies the government’s efforts to ensure foreign tech giants contribute to the nation’s revenue.